Business chiefs warn on UK investment climate

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The Independent Online

The business vote is "up for grabs", the head of the CBI declared last night as the employers organisation published a survey showing seven in 10 company chiefs believe the business environment has deteriorated since Labour won power.

Digby Jones, the CBI's director general, said businesses fear taxes and red tape will increase, forcing most companies to consider moving overseas.

"When top company decision makers start giving the kind of signals contained in our survey, the Government must sit up, listen and take action," he said on the eve of the CBI's two-day annual conference.

"The business vote is up for grabs. We will talk to anyone who comes up with ideas to reduce the regulatory burden of employing people and reduce the tax take."

Sir John Egan, the CBI's president, said businesses had been receptive to New Labour, but added: "As soon as taxes started to go up and we realised they were mis-spending our money, we started to get very worried."

Tony Blair, in akeynote address to delegates, will attempt to soothe businesses worried by the unexpected rise in National Insurance payments and new workplace regulations.

The Conservatives seized on the survey. Stephen O'Brien, the shadow industry secretary, said businesses could see a "clear difference" between the two main political parties.

"Under Labour businesses will continue to suffer and may be forced to relocate overseas," he said. "Under a Conservative government, business will be given the low tax and low regulation environment they demand to create the wealth, investment and jobs upon which we all depend."

Patricia Hewitt, the Secretary of State for Trade and Industry, will hit back today at claims that the Government has made Britain less business-friendly.

She will launch a report at the conference showing that the DTI's manufacturing advisory service has benefited companies by a total of £28m since its launch in April last year - an average £116,000 for each company assisted.

The report will also show that the service has carried out health checks at more than 4,500 companies and responded to 15,400 enquiries. Ms Hewitt said it would take a long-term partnership between industry, government and unions to make UK manufacturing strong.

In the CBI survey, conducted by Mori, more than three-quarters of the 251 senior directors polled said the UK remained an attractive place to invest - a higher proportion than last year's survey.

But 70 per cent said the environment had deteriorated in the past five years and 60 per cent expected it to worsen in the coming five. One-third blamed higher taxes or new regulations. Almost nine out of 10 believe business taxes will rise over the rest of the current parliament. None predict they will fall. Mr Jones said: "These are some of the people voting in a general election."

The survey showed the trend of companies moving overseas would accelerate and move into higher value activities such as R&D and accountancy.

While 29 per cent said they had moved jobs offshore, 43 per cent said rising costs were putting pressure on them to follow suit and 59 per cent said they were likely to expand their non-UK operations over the next couple of years.

Sir John will say today that British business is "deeply concerned" that the US is slipping into isolationism and protectionism, citing steel tariffs, farm subsidies and the "Buy America" regime.

In a speech 24 hours before John Snow, the US Treasury Secretary, addresses the conference, Sir John will say: "I reject the fixes that some US politicians espouse such as putting up tariffs. In the long run they will damage the US economy and the nation's global reputation."